Tax protestors won't go away
No matter the argument,
feds almost always prevail
By HANK EZELL
Cox News Service
July 17, 2005
ATLANTA — Last month Joseph Banister convinced a jury in Sacramento, Calif., that he was innocent of conspiring to file false tax returns. The decision cheered tax protesters everywhere.
It could not have pleased his one-time client, Walter Thompson, who was sentenced in a separate trial to six years in jail.
The verdicts got little attention, but a lot of bright people are afraid that Banister's case will encourage other people to give tax evasion a try.
"Whenever there's a win that gets publicized, it can have that effect," said Bob D. Scharin, editor of Warren, Gorham & Lamont/RIA's Practical Tax Strategies, a newsletter for tax professionals. "People start thinking they could get away with something."
The lesson of Thompson's case may be more compelling: Stop paying taxes under a "tax protest" argument and you may go to jail. Especially if you rub the government's nose in it.
The broad question of tax cheating is increasingly important because so much money is involved. In its most recent estimate, the Internal Revenue Service said as much as $353 billion went uncollected in 2001, the most recent year for which figures were available. That's 15 percent or more of all taxes that were due, according to the IRS study.
A 2003 study showed that 17 percent of Americans believe it is OK to cheat on taxes, according to IRS Commissioner Mark W. Everson. That's up from 11 percent in 1999.
The Banister-Thompson case is particularly juicy. Banister is a certified public accountant and a former investigator for the IRS. He resigned in 1999, after concluding, among other things, that the income tax is voluntary.
Since 1999, Banister has been actively promoting his anti-tax views and offering his services to people and businesses with tax troubles. Prosecutors claimed he schemed with Thompson to cheat the government out of $256,843.31, conservatively figured, in income and payroll taxes. The jury did not agree.
Thompson has been a high-profile protester, appearing once on the front page of The New York Times with his claim that U.S. tax laws are a hoax.
In April, a federal district judge called him incorrigible and sentenced him to six years in prison. The Times quoted Thompson as saying he was tried "for a pretend crime" and that the judge had "a fraudulent commission" and indulged in "outright lying" to "satisfy a false god, in this case the state."
Sometimes, Scharin observed, it's easier to prosecute the taxpayer than the adviser. "As any kid can tell you, the instigator may get away with something while the person who committed the act gets in trouble," he said.
A criminal conviction is not the only worry for egregious tax cheats, he added. "For the average taxpayer, the IRS is concerned about getting the money, not putting anybody in jail," Scharin said. "You could end up owing the tax, plus interest and penalties, which can be quite stiff. That should be enough to give anyone pause."
Still, the tax protest movement won't go away.
Some reasons: Tax laws are incredibly complicated. Nobody wants to pay taxes. A lot of people believe that others, perhaps a lot of them, are getting away with cheating. In recent years, growing anger at government no doubt has become a factor.
The arguments of the tax protesters sometimes seem imaginative, at best. One is that wages and salaries are not income. Another is that the applicable laws and the 16th Amendment to the Constitution are invalid. Others claim that paying taxes is voluntary and not mandatory, that the protester is not a "person" within the meaning of the law, and that a "sovereign" citizen of a particular state doesn't have to pay federal tax.
Promoters of those and many other arguments abound, especially on the Internet. It's easy enough to avoid them, says Scharin.
"If somebody is telling you that you don't owe any taxes or that the income tax is illegal, don't believe them," he said.
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